Monday, June 30, 2014

Freakonomics was the book that kicked off a lot of "pop economics" books by looking at a variety of subjects in a way that was new to many people, taking on various subjects such as the declining crime rate and its relation to abortion, sumo wrestling match fixing and how much drug dealers earn.

Think Like a Freak is the book that goes beyond the numbers and anecdotes from the authors' other books, and talks about how to view problems in a similar way, from another point of view.

Some of their suggestions:

Try and put aside your feelings when thinking about things. If you're already sure that you possess The Right Answer, then you're not likely to think about the problem very clearly.

Sometimes it's better to admit you don't know:

The next time you run into a question that you can only pretend to answer, go ahead and say “I don’t know”—and then follow up, certainly, with “but maybe I can find out.” And work as hard as you can to do that. You may be surprised by how receptive people are to your confession, especially when you come through with the real answer a day or a week later

Children often think of things with no preconceived notions. This is often a helpful frame of mind for considering problems.

Incentives matter. This is something pretty much any economist will tell you.

Being persuasive is important to accomplish things - it's not enough to be right. You also have to convince other people that you're right:

"Sure, it’s important to acknowledge the flaws in your argument and keep the insults to yourself, but if you really want to persuade someone who doesn’t wish to be persuaded, you should tell him a story"

When asked to name the attributes of someone who is particularly bad at predicting, Tetlock needed just one word. “Dogmatism,” he says. That is, an unshakable belief they know something to be true even when they don’t. Tetlock and other scholars who have tracked prominent pundits find that they tend to be “massively overconfident,” in Tetlock’s words, even when their predictions prove stone-cold wrong. That is a lethal combination—cocky plus wrong—especially when a more prudent option exists: simply admit that the future is far less knowable than you think.

This makes a lot of sense to me. I think the less we are in the business of trying to predict things, the better off we are. The future is complicated, and there are so many ways things can leap off the track you imagined they were on.

On incentives:

Why do some incentives, even those created by smart and well-intentioned people, backfire so badly? We can think of at least three reasons: 1. No individual or government will ever be as smart as all the people out there scheming to beat an incentive plan. 2. It’s easy to envision how you’d change the behavior of people who think just like you do, but the people whose behavior you’re trying to change often don’t think like you—and, therefore, don’t respond as you might expect. 3. There is a tendency to assume that the way people behave today is how they’ll always behave. But the very nature of an incentive suggests that when a rule changes, behavior does too—although not necessarily, as we’ve seen, in the expected direction.

and

Figure out what people really care about, not what they say they care about.

Incentivize them on the dimensions that are valuable to them but cheap for you to provide.

Pay attention to how people respond; if their response surprises or frustrates you, learn from it and try something different.

Whenever possible, create incentives that switch the frame from adversarial to cooperative.

Never, ever think that people will do something just because it is the “right” thing to do.

Know that some people will do everything they can to game the system, finding ways to win that you never could have imagined. If only to keep yourself sane, try to applaud their ingenuity rather than curse their greed.

I'm a fan of economic thinking, so I found the book to be a good read, especially since it doesn't really deal with economics as such, but as part of a way of thinking about many things, some of which might not see the domain of economics.